Updated with information on pension-fund return at 9:59p.m. on July 19, 2011

San Francisco's pension fund is expected to post banner gains this year, significantly lessening the city's ballooning pension costs and narrowing the cost-savings gap between two competing pension-reform proposals. According to estimates released Tuesday morning by San Francisco Controller Ben Rosenfield, this may substantially ease the amount the city will be required to pay into the fund in coming years.

Proposals from both Mayor Ed Lee and Public Defender Jeff Adachi appear headed toward the November ballot. Based on earlier estimates from the controller's office, Adachi has said that his plan would save the city $500 million more over the next decade.

But if city's pension fund posts a 25 percent gain this year, Rosenfield reported, and if the fund from garners from then on a 7.75 percent annual return, the city's obligations will decrease substantially in the coming decade, to $4.4 billion from $6.6 billion. The 25 percent return is not a given; the unaudited figure stands at about 21.5 percent. The controller's office was not able to generate an actuarial estimate based on the 21.5 percent figure.

In that scenario, the city's plan, which would increase city workers' pension contributions, would save the city $968 million over a decade, while Adachi's plan would save $1.225 billion, narrowing the savings gap between the two to $257 million.

In a second, gloomier scenario, Rosenfield's office, which is charged with offering nonpartisan data, said that if the pension fund saw a much-lower return over the next decade — just 4.5 percent through 2014-2015 and 7.75 percent thereafter — then Adachi's plan would save $336 million more than the city's plan over the next decade.

The controller also credits the mayor's plan with $75 million in savings over 10 years from increased employee contributions to the retiree health care trust fund. As of last year, the city had a $4.4 billion unfunded liability to provide its retirees with lifelong health coverage.

The Board of Supervisors will meet Tuesday afternoon to discuss and possibly approve the mayor's proposal, which was the product of months of talks between City Hall, labor groups and civic leaders, including Bay Citizen chairman Warren Hellman.

Adachi was excluded from those negotiations, but has said repeatedly that he would drop his own pension-reform initiative if the City Hall plan generated adequate cost savings. Adachi was not immediately available to comment on the controller's new estimates.